September 05, 2017

It is firmly established in California that in-house counsel can collect fees in appropriate fee-shifting contexts as long as they can establish that their fees are not unnecessarily duplicative in nature for services provided by other attorneys on the matter. (See, e.g., Mix v. Tumanjan Development Corp., 102 Cal.App.4th 1318, 1324 (2002); Garfield Bank v. Folb, 25 Cal.App.4th 1804, 1808-1809 (1994), disapproved on other grounds in Trope v. Katz, 11 Cal.4th 274, 292 (1995).) However, that begs the question about the type of substantiation or showing needed to persuade trial judges to make award for in-house counsel work.

We can report that Daniel K. Wiig, in-house counsel to Municipal Credit Union, has written an instructive article with some tips on what to do in an August 4, 2017 Corporate Counsel article.

First, in-house counsel needs to establish his/her work is not redundant of outside counsel's work. To the extent in-house counsel is really working as the “client,” his/her work is generally not compensable.

Second, because the lodestar method likely will be applied, courts are inclined to consider a “blended” rate with respect to rates charged by associates, partners, counsel and paralegals in the venue for in-house counsel in cases guided by outside counsel, recognizing in-house legal departments do not necessarily operate in lockstep fashion as real law firms. However, as shown below, this may not happen where in-house counsel did all the work in leading to a successful result—meaning real lodestar rates are allowed

Third, as far as substantiation to support a reasonable fee request, in-house attorneys are advised to maintain a record akin to a law firm’s billing sheets, although an Excel spreadsheet with detail as far as time and task might well pass the substantiation test. (Cruz v. Local Union No. 3, Internat’l Brotherhood of Elec. Workers, 34 F.3d 1148 (2d Cir. 1994).)

Finally, where in-house counsel did all or most of the work leading to a successful result, courts seem to be more willing to award hourly rates for comparable private attorneys in the litigation area where the case happens to be venued. (See, e.g., Municipal Credit Union v. Queens Auto Mall, Inc., 126 F.Supp.3d 290, 299 (E.D.N.Y. 2015).) Importantly, in the Queens Auto Mall case, the in-house attorneys kept contemporaneous time records which made it easy for a district judge to award them $70,612.50 in Lanham Act attorney’s fees following a default judgment. (Id. at 300-301.) Again, the presence of good substantiation was key to in-house counsel recovering a major portion of their fee request.